"Wal-Mart's sales have been hampered this year by a 2 percentage point increase in Social Security taxes that has reduced spending among its shoppers, many of whom live paycheck to paycheck. Jerry Murray, a former vice president of finance and logistics at the retailer, said in a February e-mail obtained by Bloomberg News that the sales that month had been a 'total disaster.'

" 'The 2 percent payroll tax increase continues to impact our customer,' Bill Simon, Wal-Mart's U.S. president and CEO, said in today's statement. The company also expected sales to be helped by rising grocery prices, which didn't occur in a 'meaningful way,' he said."

The increase in Social Security taxes went into effect at the first of the year after Congress let a 2009 cut — aimed at economic stimulus — expire.

The company expects net sales to increase by 2 to 3 percent instead of the 5 to 6 percent it had earlier forecast.

Meanwhile, sales at the company's international stores also decreased 2.9 percent to $33 billion.

Wal-Mart blamed "significant ongoing headwinds" related to currency exchange rates. It now expects international annual sales to rise by only 3 percent instead of the 6 percent increase it had previously forecast.

Update At 4:00 p.m. ET. Markets Close

Stocks on Thursday ended at their lowest level since June 20 — results blamed partly on Wal-Mart's earnings report and partly on those of computer networking equipment maker Cisco. The Dow was off 1.47 percent, closing down 225.39 points at 15,112.27. The S&P 500 fell 1.43 percent, or 24.07 points, ending the day at 1,661.32.